Exhibit
10.23


 


 


HEARTLAND PAYMENT SYSTEMS, INC.


 


2002 PEPShares PLAN


 


STOCK OPTION
AGREEMENT


 


This Stock Option Agreement (“Award Agreement”) is being entered into by
the Optionee executing this Award Agreement below and the Company under and
subject to the Company’s 2002 PEPShares Plan. Capitalized terms not defined
herein shall have the meanings assigned to them in the Plan.


 


1.             Grant of
Option.  The Company hereby
agrees to grant to the Optionee, pursuant to the terms of the Plan, Options to
purchase such number of Shares as shall be set forth from time to time in one
or more Notices of Grant to the Optionee, at the Exercise Price per Share set
forth in the Notice of Grant, and subject to the terms and conditions of the
Plan, which is incorporated herein by reference. In the event of a conflict
between the terms and conditions of the Plan and this Award Agreement or a
Notice of Grant, the terms and conditions of the Plan shall prevail.


 


All Options granted under the plan are designated as
Incentive Stock Options (“ISOs”)
intended to qualify as “incentive stock options” as defined in Section422 of
the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code
Section422(d), or to the extent any other requirement of Section 422 is not
met, such Options shall be treated as Nonqualified Stock Options (“NSOs”).


 


2.             Exercise of Option.


 


(a)           Right to Exercise.  This Option shall be exercisable during its
term in accordance with the Plan and this Award Agreement. No Option may be
exercised until it has vested in accordance with the terms of the Plan and this
Award Agreement.


 


(b)           Accelerated Vesting.


 


(i)            An Optionee who is a
PEPShare Employee hereby acknowledges and agrees that the vesting of any
previously issued Options shall accelerate on the IPO Date if Optionee has
achieved 105% or more of Optionee’s cumulative personal quota from January 1,
2002, through the end of the calendar month immediately preceding the IPO Date.
Optionee’s personal quota shall be established for any period by Optionee’s manager
and approved by the Administrator.


 


(ii)           After the IPO Date, an
Optionee who is a PEPShare Employee may request acceleration of the vesting of
such Optionee’s Options by providing the Administrator with notice in writing
that such Optionee has achieved 105% or more of such Optionee’s cumulative
personal quota from January 1, 2002, through the end of any calendar month on
which such determination is made, such personal notice to include a detailed
calculation demonstrating such achievement. Such Optionee’s Options shall


 


1

















 


accelerate upon confirmation by the
Administrator that such Optionee has achieved 105% or more of his or her
cumulative personal quota for the applicable period.


 


(iii)          An Optionee who is a
HeartlandShare Employee hereby acknowledges and agrees that the vesting of any
previously issued Options shall accelerate on the IPO Date.


 


(c)           Method of Exercise.  Options shall be exercisable by delivery of
an Exercise Notice in the form attached as Exhibit A which shall state the
election to exercise the Option, the number of Shares with respect to which the
Option is being exercised, and such other representations and agreements as may
be required by the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all exercised Shares. An Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by the aggregate Exercise Price.


 


(d)           Compliance with
Applicable Laws.  No Shares shall be
issued pursuant to the exercise of an Option unless such issuance and such
exercise complies with Applicable Laws. Assuming such compliance, for income
tax purposes the Shares shall be considered transferred to the Optionee on the
date on which the Option is exercised with respect to such Shares.


 


(e)           Shareholders’
Agreement.  As a condition to the
exercise of an Option, Optionee and any other person or persons exercising an
Option, at the request of the Company, will be required to become a party to
the Company’s Amended and Restated Shareholders’ Agreement, dated October 11,
2001, as the same may be amended or supplemented by executing a counterpart
thereof, whereupon such Optionee and such other persons shall be bound by the
provisions thereof, including, but not limited to, provisions which may
restrict transfer of Shares and provide a right of repurchase to the Company.
If Optionee is required to become a signatory to any such agreement, a copy
thereof will be delivered to the Optionee for his or her review following
receipt by the Company of the applicable Exercise Notice.


 


3.             Method of Payment.  Payment of the aggregate Exercise Price
shall be by any of the forms of consideration set forth in the Plan. As
provided in the Plan, payment for any Portfolio Purchase Options shall consist
entirely of a portion of the Optionee’s merchant portfolio equity. The amount
of such portfolio equity that will be purchased by the Company in satisfaction
of the Exercise Price will depend on the Optionee’s portfolio equity multiplier
(“PEM”) at the time of such exercise as determined by the Administrator. The
Company will purchase merchant contracts which yield monthly residuals equal to
the aggregate Exercise Price of Portfolio Purchase Options divided by the PEM.
All determinations and calculations to be made hereunder, including but not
limited to, the selection of the merchant contracts that the Company will
purchase from the Optionee in satisfaction of such Exercise Price, shall be
made by the Company in its sole discretion.


 


4.             Restrictions on
Exercise.  This Option may not be
exercised until such time as the Plan has been approved by the shareholders of
the Company, or if the issuance of such Shares upon such exercise or the method
of payment of consideration for such shares would constitute a violation of any
Applicable Law.


 


2

















 


5.             Non-Transferability
of Option.  This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of the Plan and this Award Agreement shall be binding upon
the executors, administrators, heirs, successors and assigns ofthe Optionee.


 


6.             Term of Option.  This Option may be exercised only within the
term set out in the Plan, and may be exercised during such term only in
accordance with the Plan and the terms of this Award Agreement.


 


7.             Optionee’s
Representations.  In the event the
Shares have not been registered under the Securities Act of 1933, as amended,
at the time this Option is exercised, the Optionee shall, if required by the
Company, concurrently with the exercise of all or any portion of this Option,
deliver to the Company his or her Investment Representation Statement in the
form attached hereto as Exhibit B.


 


8.             Lock-Up Period.  Optionee hereby agrees that, if so requested
by the Company or any representative of the underwriters (the “Managing
Underwriter”) in connection with any registration of the sale of any securities
of the Company under the Securities Act, Optionee shall not sell or otherwise
transfer any Shares or other securities of the Company during the 180-day
period (or such other period as may be requested in writing by the Managing
Underwriter) (the “Market Standoff Period”) following the effective date of a
registration statement of the Company filed under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.


 


9.             Tax Consequences.  Set forth below is a brief summary as of the
date of this Award Agreement of some of the federal tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.


 


(a)           Exercise of NSO.  There may be a regular federal income tax
liability, at ordinary income tax rates, upon the exercise of an NSO. If
Optionee is an Employee or a former Employee, the Company will be required to
withhold from Optionee’s compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.


 


(b)           Exercise of ISO.  If an Option qualifies as an ISO, there will
be no regular federal income tax liability upon the exercise of the Option,
although the Optionee may be subject to the alternative minimum tax in the year
of exercise.


 


(c)           Disposition of Shares.  The disposition of Shares is generally a
taxable event. The tax treatment will depend on whether the Option is an ISO or
an NSO, and on the length of time for which the Shares have been held by
Optionee.


 


3

















 


(d)           Notice of
Disqualifying Disposition of ISO Shares. 
If the Option granted to Optionee herein is an ISO, and if Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to the ISO
on or before the later of (i) the date two years after the Date of Grant, or
(ii) the date one year after the date of exercise, the Optionee shall
immediately notify the Company in writing of such disposition. A disqualifying
disposition creates the potential that the gain that may have otherwise been
taxed at preferential capital gain rates could be taxed at traditional ordinary
income rates. Optionee acknowledges and agrees that Optionee may be subject to
income tax withholding by the Company on the compensation income recognized by
the Optionee.


 


10.           Entire Agreement;
Governing Law.  The Plan is
incorporated herein by reference. The Plan and this Award Agreement constitute
the entire agreement of the parties with respect to the subject matter hereof
and supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee’s interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by the laws of
the State of New York.


 


11.           No Guarantee of
Continued Service.  OPTIONEE
ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE PLAN IS
EARNED ONLY BY CONTINUING AS AN EMPLOYEE AT THE WILL OF THE COMPANY (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH IN THE
PLAN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS
AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL,
AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’ S RIGHT OR THE COMPANY’S
RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS AN EMPLOYEE AT ANY TIME, WITH OR
WITHOUT CAUSE.


 


[Signature Page Follows]


 


4

















 


[Signature Page to Stock Option Agreement]


 


Optionee acknowledges receipt of a copy of the Plan
and represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts any Options subject to all of the terms and
provisions thereof. Optionee has reviewed the Plan and this Award Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Award Agreement and fully understands all provisions of the
Award Agreement. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Administrator upon any questions
arising under the Plan, this Award Agreement or an Option. Optionee further
agrees to notify the Company upon any change in the residence address set forth
above.


 


	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  OPTIONEE

  	
  HEARTLAND PAYMENT SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  Signature

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
							



 


5

















 


EXHIBIT
A


 


2002 PEPShares PLAN

EXERCISE NOTICE


 


Heartland Payment Systems, Inc.

130 Nassau Street

Princeton, New Jersey 08542


 


Attention: Shareholder Services


 


1.             Exercise of Option.  Effective as of today,
              
     , 200_, the undersigned Optionee hereby elects to
exercise Optionee’s option to purchase
                       
Shares of the Common Stock of Heartland Payment Systems, Inc. (the “Company”)
under and pursuant to the 2002 PEPShares Plan (the “Plan”). Such Option was
granted to the Optionee pursuant to a Stock Option Agreement dated
                       
       ,
             
(the “Award Agreement”) and is evidenced by a Notice of Stock Option Grant
dated                 
      ,
          with respect to
Grant Number
                 .
Capitalized terms not defined herein shall have the meanings assigned to them
in the Award Agreement.


 


2.             Delivery of
Payment.  Optionee herewith delivers
to the Company the full purchase price of the Shares, as set forth in the Plan
and the Award Agreement. To the extent that the Optionee is exercising a
Portfolio Purchase Option, Optionee hereby sells, assigns, transfers and
conveys to the Company, and the Company shall purchase and acquire from the
Optionee, all of the Optionee’s right, title and interest to such portion of
Optionee’s merchant portfolio equity as shall be necessary to pay for the
exercise of such Portfolio Purchase Options in accordance with Section 3 of the
Award Agreement.


 


3.             Representations of
Optionee.  Optionee acknowledges
that Optionee has received, read and understood the Plan and the Award
Agreement and agrees to abide by and be bound by their terms and conditions.


 


4.             Rights as
Shareholder.  Until the issuance of
the Shares (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to such optioned Shares, notwithstanding the exercise of the Option. The Shares
shall be issued to the Optionee as soon as practicable after the Option is
exercised. No adjustment shall be made for a dividend or other right for which
the record date is prior to the date of issuance except as permitted by the
Administrator.


 


5.             Tax Consultation.  Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee’s purchase or
disposition of the Shares. Optionee represents that Optionee has consulted with
any tax consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.


 


6.             Restrictive
Legends and Stop-Transfer Orders.


 


(a)           Legends.  Optionee understands and agrees that the
Company may cause such legends as it deems appropriate to be placed upon any
certificate(s) evidencing ownership of the Shares, including any legends
required by state or federal securities laws.


 


1

















 


(b)           Stop-Transfer
Notices.  Optionee agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate “stop transfer” instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.


 


(c)           Refusal to Transfer.  The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Exercise Notice or (ii) to treat
as owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.


 


7.             Successors and
Assigns.  The Company may assign any
of its rights under this Exercise Notice to single or multiple assignees, and
this Exercise Notice shall inure to the benefit of the successors and assigns
of the Company. Subject to the restrictions on transfer herein set forth, this Exercise
Notice shall be binding upon Optionee and his or her heirs, executors,
administrators, successors and assigns.


 


8.             Interpretation.  Any dispute regarding the interpretation of
this Exercise Notice shall be submitted by Optionee or by the Company forthwith
to the Administrator which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Administrator shall be final
and binding on all parties.


 


9.             Governing Law;
Severability.  This Exercise Notice
is governed by the laws of the State of New York.


 


10.           Entire Agreement.  The Plan and Award Agreement are
incorporated herein by reference. This Exercise Notice, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee’s interest except by means of a writing
signed by the Company and Optionee.


 


	
  Submitted by:

  	
   

  	
  Accepted by:

  
	
   

  	
   

  	
   

  	
   

  
	
  OPTIONEE

  	
   

  	
  HEARTLAND PAYMENT SYSTEMS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Print Name

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date Received:

  	
   

  	
   

  
									



 


2

















 


EXHIBIT
B


 


INVESTMENT REPRESENTATION STATEMENT


 


	
  OPTIONEE:

  	
   

  
	
   

  	
   

  
	
  COMPANY:

  	
  Heartland Payment Systems, Inc.

  
	
   

  	
   

  
	
  SECURITY:

  	
   

  
	
   

  	
   

  
	
  AMOUNT:

  	
   

  
	
   

  	
   

  
	
  DATE:

  	
   

  



 


In connection with the purchase of the above-listed
securities (`Shares”), the undersigned Optionee represents to the Company the
following:


 


(a)           Optionee is aware of
the Company’s business affairs and financial condition and has acquired
sufficient information about the Company to reach an informed and knowledgeable
decision to acquire the Shares. Optionee is acquiring these Shares for
investment for Optionee’s own account only and not with a view to, or for
resale in connection with, any “distribution” thereof within the meaning of the
Securities Act of 1933, as amended (the ‘Securities Act”).


 


(b)           Optionee acknowledges
and understands that the Shares constitute “restricted securities” under the
Securities Act and have not been registered under the Securities Act in
reliance upon a specific exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of Optionee’s investment intent as
expressed herein. In this connection, Optionee understands that, in the view of
the Securities and Exchange Commission, the statutory basis for such exemption
may be unavailable if Optionee’s representation was predicated solely upon a
present intention to hold these Shares for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Shares, or for a period of one year or any
other fixed period in the future. Optionee further understands that the Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Optionee
further acknowledges and understands that the Company is under no obligation to
register the Securities, except as provided in the Company’s Amended and
Restated Shareholders’ Agreement, dated October 11, 2001 (including all
amendments thereto). Optionee understands that the certificate evidencing the
Shares will be imprinted with a legend which prohibits the transfer of the
Shares unless they are registered or such registration is not required in the
opinion of counsel satisfactory to the Company, and any other legend required
under applicable state securities laws.


 


(c)           Optionee is familiar
with the provisions of Rule 701 and Rule 144, each promulgated under the
Securities Act, which, in substance, permit limited public resale of “restricted
securities” acquired, directly or indirectly from the issuer thereof, in a
non-public offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the time of the grant
of the Option to the Optionee, the exercise will be exempt from registration
under the Securities Act. In the event the Company becomes subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, 90 days thereafter (or such longer period as any market
stand-off agreement may require) the Shares exempt under Rule 701 may be
resold, subject to the satisfaction of certain of


 


1

















 


the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
“broker’s transaction” or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934, as amended); and, in
the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of Shares being sold during any three-month
period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.


 


In the event that the Company does not qualify under
Rule 701 at the time of grant of the Option, then the Shares may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one year after the later of the date
the Shares were sold by the Company or the date the Shares were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Shares by an affiliate, or by a non-affiliate who
subsequently holds the Shares less than two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.


 


(d)           Optionee further
understands that in the event all of the applicable requirements of Rule 701 or
144 are not satisfied, registration under the Securities Act, compliance with
Regulation A, or some other registration exemption will be required; and that,
notwithstanding the fact that Rules 144 and 701 are not exclusive, the staff of
the Securities and Exchange Commission has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 or 701 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their respective
brokers who participate in such transactions do so at their own risk. Optionee
understands that no assurances can be given that any such other registration
exemption will be available in such event.


 


	
   

  	
  OPTIONEE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
				



 


2